India’s industrial output drops to 26-month low as rate hike hits demand

  • India’s annual industrial output contracted 4% on Oct 22, its weakest performance in 26 months, after revised growth of 3.5% on Sep 22, data released on 12 Dec 22 showed, as rising interest rates and slowing global growth dampened consumer demand.
  • Sluggish rural spending and rising borrowing costs have started hitting consumer demand for durables and impacted manufacturing, which accounts for about 16% of the Indian economy.
  • Economists said despite an easing of headline retail inflation to 5.9% on Nov 22, the central bank was likely to raise its policy rate by 25 basis points on Feb 23. On Nov 22, India’s unemployment rate rose to 8.0%, the highest in three months, while the urban unemployment rate increased to 8.96%, according to Mumbai-based Centre for Monitoring Indian Economy.

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